A functional organizational structure is the most common of the three organizational structures adopted by most companies. Companies organized by function group employees according to their activities in the organization.

A functional organizational structure is the most common of the three organizational structures adopted by most companies. Companies organized by function group employees according to their activities in the organization. Human Resources employees have their own HR department, as do employees working in sales, marketing, finance and technical support. Organizing a company in this way has inherent advantages and disadvantages.

The Specialization Advantage

The most obvious advantage of a functional organization is that grouping employees by specialization ensures a dependable level of departmental competence. This is particularly so for large organizations that have several functional levels within a department – a particular tech group that follows up on tech issues not resolved by the primary telephone tech support group, for example. Membership in this group could require a bachelor's degree in computer science, a manager's recommendation and a minimum number of years of field experience. This ensures that support issues moved up to the follow-up group are handled by fully qualified personnel, which increases customer satisfaction and retention.

Operational Speed

A related benefit of this kind of organizational specialization is operational speed. By and large, a senior tech is going to handle a support problem faster than someone with less experience.

Operational Clarity

Segregating the workforce according to function clarifies organizational responsibility and allocation of tasks. This tends to eliminate duplication of assignments that waste time and effort and makes it easier for management to direct work to appropriate employees.

The Disadvantage of Segregation

Some benefits of a functional organization can become disadvantages. Having departments populated by employees specializing in specific work areas means that fruitful interactions between employees with different perspectives are reduced or eliminated.

One of technology entrepreneur Elon Musk's advantages over competitors is that most of them have expertise primarily in a single field. Because Musk brings to a new task knowledge obtained in several different areas, he has repeatedly brought useful and profitable perspectives that eluded his competitors to a current project. His Boring Project, for example, a design and implementation for an ultra high-speed underground people mover, is a spinoff of Space X and borrows technological elements from space travel to solve terrestrial transportation problems.

Weakening of Common Bonds

Having a common organizational purpose improves employee morale and performance and is an important predictor of organizational success. When each group of specialists in a functional organization is relatively isolated, the common bond that emphasizes a single overarching organizational purpose is almost inevitably weaker than in an organization where different kinds of employees regularly interact.

Lack of Coordination

In a perfect functional organization, each group's tasks would require no input from other functional groups, but this is often not the case. As communication becomes increasingly dominant in organizations, isolated groups may underperform or even fail because they have no institutionally recognized way of communicating needs and issues to other functional groups that might have helped. In some instances, managers of other functional groups may not respond helpfully or in a timely way because "it's not our problem." By the time the need for cooperation has been established, the moment when cooperation would have been most effective may already have passed.

Territorial Disputes

A further disadvantage of a functional organization closely related to the failure of functional groups to cooperate with one another is the possibility of territorial disputes. These disputes may have to do with disagreements over goals, budgetary competition or any number of issues that stem from a clash of egos that occur when each department has its own separate functional structure or where a strong sense of a common purpose is lacking.

About the Author

Patrick Gleeson received a doctorate in 18th century English literature at the University of Washington. He served as a professor of English at the University of Victoria and was head of freshman English at San Francisco State University. Gleeson is the director of technical publications for McClarie Group and manages an investment fund. He is a Registered Investment Advisor.